Gold Market Insights: Dubai's Next Move

Gold Market Trends in Dubai: Correction or New Surge Ahead?

Dubai's gold market has once again grabbed the spotlight as a slight price increase was recorded in the emirate amidst stable demand, following a mild drop in international prices. While gold prices started to decline internationally after reaching near-record highs, Dubai's gold trading remained balanced, highlighting the local demand's resilience and a calm reaction to global factors.

International Rate Movements

In early October, gold reached a new historical high at around $4,300 per ounce before dropping to approximately $4,050. This represents a nearly 6% decrease, which raised questions among small investors regarding the sustainability of the trend. However, experts clearly refer to this as a correction, a natural phenomenon after extreme overbought market conditions.

Technical analyses confirm this: the Relative Strength Index (RSI) – a significant momentum indicator – reached 92, far exceeding the 70 threshold that indicates an overbought market. Such a value almost always signals a forthcoming minor pullback, even when fundamental economic factors remain largely unchanged.

What Has Driven Gold So Far?

The surge in gold prices over recent months has been driven by multiple factors: geopolitical tensions, monetary policy expectations, fears of a slowing global economy, and record levels of gold purchases by central banks. For investors, gold has always been a safe haven during uncertain times, and these combined factors have given significant support to gold prices.

Currently, the environment is beginning to change. Tensions between the USA and China have eased, conflicts in the Middle East have moderated, central banks are adopting a more cautious tone, and there is a downward trend in central bank gold purchases.

Dubai's Situation: Correction Encourages Buying

Dubai holds a unique position in global gold trading. The emirate is not only a transit hub in international gold traffic but also a major retail jewelry market. According to the Dubai Gold and Jewellery Group, the price of 24-karat gold was 482.75 dirhams per gram on Friday, while it closed at 479 dirhams just the day before. The 22-karat gold traded at 447, 21-karat at 428.50, and 18-karat at 367.50 dirhams.

The slight price increase is particularly interesting in light of the falling global rates. This suggests that local demand remains strong, with many buyers perceiving the global price decline as a favorable entry point, particularly with the festive and wedding seasons approaching.

Seasonality and Portfolio Adjustments

It's not uncommon for the gold market to weaken during the fall. October is traditionally the most volatile month for commodity markets, driven in part by major institutional investors' year-end portfolio rebalancing. During this time, many funds reduce their exposure to riskier assets, including gold, which can exert selling pressure on prices – regardless of the continued strength in physical demand.

This dynamic is especially true before weekends when investors are reluctant to hold open positions during market closures, when any geopolitical event could unexpectedly impact the opening.

Risks for Mining Companies and Speculative Positions

On the precious metals market, it's well known that mining company stocks tend to be more volatile than the raw material itself. It's no different now: while gold prices have fallen by less than 6%, mining stocks have shown a 15-20% decline. Smaller, riskier companies have suffered heavier losses, while larger, more stable firms are faring better. This phenomenon also indicates that the market is undergoing a classic correction phase, rather than the beginning of a collapse.

What to Expect in the Near Future?

Most experts believe that the long-term fundamentals of gold remain strong. Central banks continue to diversify their reserves, world-level public debt is not decreasing, and investors seek value-preserving assets to counter inflation and currency depreciation. However, short-term movements remain highly dependent on guidance from the Federal Reserve, U.S. inflation data, and the global risk appetite.

For Dubai buyers, in any case, the current situation can be calmly observed: the present levels provide a favorable entry opportunity for many, especially if gold prices stabilize. Local jewelry dealers are confident that prices could rise again after the current correction – but at least demand remains assured.

Summary

The current gold pullback is not a sign of a collapse, but rather a natural pause after a strong surge. The Dubai market handles this calmly, with buyers seeing more opportunity than danger. Gold can remain a stable value preserver, especially in times when economic and geopolitical uncertainties don't entirely vanish from the horizon. Thus, the current period may call not for panic but for conscious consideration for both investors and buyers alike.

(The article is sourced from Dubai Gold and Jewellery Group data.)